ASSISTANT COMMISSIONER OF INCOME TAX Vs. SARVAMANGALA PROPERTIES

JUDGEMENT

(1.) The appeal being A. P. O. No. 701 of 1992 has been preferred by the appellant against the judgment and order dated June 19, 1991, passed by the learned single judge of this court in Matter No. 622 of 1990. By the judgment and order impugned the learned judge allowed the writ petition filed by the petitioner, presently the respondent, and set aside the notice in question issued under Section 148 of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), in respect of the assessment year in question. The notice impugned in this proceeding is dated March 30, 1987, and the same relates to the assessment year in question 1970-71.

(2.) The facts of the case may briefly be stated as follows : In 1950, the petitioner purchased premises No. 5, Clive Row, Calcutta (hereinafter referred to as the said "premises"), at a public auction which was conducted by the certificate officer under the provisions of the Bengal Public Demands Recovery Act, 1913. The petitioner purchased the said premises subject to prior encumbrances for a total price of Rs. 2,27,250. The auction under the Bengal Public Demands Recovery Act, 1913, was for recovery of sales tax. The petitioner took possession of the said premises and the same had been mutated in the name of the petitioner in the records of the Calcutta Corporation. On April 3, 1957, the Hongkong and Shanghai Banking Corporation, Calcutta, filed a suit against the original owner of the premises as well as the petitioner for recovery of a sum of Rs. 35,34,063.11.6 on the ground that the premises had been mortgaged by the original owner to the bank. The interlocutory application filed by the bank in the said suit was disposed of by an order dated April 29, 1957. The said order in so far as it is material provides as follows (wherein the petitioner is referred to as the defendant firm and the bank as the plaintiff-bank) :

(3.) Pursuant to the said interim order, the petitioner paid Rs. 17,500 per month to the bank up to March, 1976. Since 1961-62, the income from the premises was assessed in the hands of the petitioner. Deduction was claimed by the petitioner in respect of the said sum of Rs. 17,500 per month on account of interest. As claimed by the petitioner, for the assessment year 1961-62, the petitioner disclosed all the material facts leading up to the purchase of the premises including the pleadings relating to the suit filed by the bank as well as the interim order dated April 29, 1957, before the Income-tax Officer and the Income-tax Officer allowed the claim of the petitioner in respect of the said payment of Rs. 17,500 per month on account of interest. The said deduction was permitted by the Income-tax Officer for the assessment years 1962-63 to 1976-77. The said suit was decreed on January 22, 1976, in favour of the bank whereupon the petitioner preferred an appeal from the judgment and decree dated January 22, 1976. The appeal was disposed of by the appeal court on May 19, 1987, and the decree dated January 22, 1976, was modified by consent. It was agreed between the parties that the bank would retain Rs. 30 lakhs out of the amount paid by the petitioner to the bank in pursuance of the above noted interim order dated April 29, 1957, and would refund a sum of Rs. 9,02,292.70 together with a further amount of Rs. 4,40,000 on account of interest. This has been done by the bank.